Chanel: Creating an Empire

As speculation continues to swirl that luxury goods maker Chanel is pondering an IPO or a merger with one of its larger peers (a rumour that the house has continuously denied), it is expanding at an accelerated rate into new territories.

Over the last two years, Chanel has also gone on a buying spree, expanding its portfolio outside its fashion & accessories, eyewear, fragrance, skincare, makeup, fine jewellery, and watches portfolio. From wineries to sustainable startups, its investments have broadened the company’s divisions, as well as its power.

“They are clearly very big and could play a more relevant role in the industry. But getting to be an LVMH requires a lot more homework,” Luca Solca, Senior Research Analyst, Luxury Goods at Bernstein, told NOWFASHION when asked if Chanel could ever compare to its larger leather goods-to-spirits French peer, in terms of size, revenues, and range of luxury goods.

Owned by the notoriously secretive Wertheimer family, the French maison, founded by legendary designer Coco Chanel, moved up the ranks in marketing consultancy Interbrand’s 2019 ranking of top global brands, ranking as the number two luxury brand after Louis Vuitton and beating Hermès and Gucci, the fastest-growing luxury brand on the list. Chanel’s annual revenues totalled $11.12 billion in 2018, up 10.5 percent versus a year earlier. The family reportedly financed $1 billion in investments in 2018.

 

According to Interbrand, Chanel has also exploded in terms of brand value – $22 billion in 2019 compared to only $6 billion in 2009. 


According to press reports, Chanel purchased the Domaine de l’Île winery located on the small island of Porquerolles just off France’s southern coast in the region of Provence. The 75-acre organic vineyard produces red, white, and rosé wines.  

The Wertheimer brothers – Alain and Gérard, who own the controlling interest in the House of Chanel – already own three vineyards in France and one in Napa. Yet, the Domaine de l’Île purchase marks a real foray into the world of spirits for the company – such a move could render it more competitive alongside luxury peer LVMH.

Chanel’s press office declined to comment on the matter.

Some of the investments over the past year were meant to strengthen the company’s core leather goods division, as the industry faces a shortage in quality hides and artisanal craftsmanship. According to reports, Chanel bought a stake in printed leather specialist Italian tannery Samanta; a stake in Renato Corti, a company that owns and operates leather factories in Florence and Milan; as well as investing in high-end bag maker Mabi, which also owns factories in Florence and San Daniele, Italy.  

Before the environmental crisis peaked and the sustainability wave took off, luxury companies like Hermès were scooping up exotic hide farms all over the world to control the price of high-ticket hides. Today, however, tech and science companies at the forefront of sustainability are high in demand and hard to come by. 
 
With an eye on creating a more sustainable business, in 2018, Chanel bought into Finnish group Sulapac which manufactures eco-packaging made with biodegradable materials and bioplastics made of woodchips and natural adherents.

Earlier this year, Chanel bought a minority stake in Evolved by Nature, a startup based just outside of Boston which was founded by two Tufts alums, biomedical engineer Rebecca Lacouture and chemist Gregory Altman in 2013. The duo has already garnered heavy investments from the Kraft and Disney families and specialises in separating silk proteins from discarded silkworm cocoons for cosmetics and eco-friendly apparel coatings.

“Some of the most interesting developments are seemingly appearing from Chanel, which – after more than a century of secrecy – has very recently published all of its figures. We can only wonder if Chanel has done that because it is possibly considering an IPO or a high-profile merger with one of its peers. An LVMH-Richemont merger would put the final word into industry consolidation,” Solca said in a report published this week.

 

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